Industrialists fear their margins will be squeezed by faltering consumer demand at a time when their order books are thinner than at any time since October, 2003.

This bleak picture emerged yesterday from the CBI's industrial trends survey for June, which showed those expecting to cut their prices in the coming months outnumbering those hoping to raise them by five per cent of the sample.

That is a marked change from January when a positive balance of 19 per cent thought they could charge higher prices to offset the rocketing cost of oil and other raw materials.

The CBI pointed out that oil prices are now 46 per cent higher than in June last year after rising by $2 a barrel between its May and June surveys. Metal prices have risen by 17 per cent.

"Prices are expected to return to the downward trend of the past seven years, following an 18-month pause," the employers' organisation commented.

Meantime, 39 per cent of the 771 manufacturers responding to the June survey described their order books as "below normal" and only 14 per cent as "above normal".

The negative balance of minus 25 per cent makes the average over the latest three months 24 per cent, against minus eight per cent over the previous 12 months.

Export order books with an adverse balance of minus 17 per cent were broadly in line with the average since last August. "Demand is subdued across the manufacturing sector with all the main industry groups reporting that order books are below normal," said Nick Brayshaw, chairman of the CBI manufacturing council."Manufacturers are facing a further squeeze on profit margins over the next three months as they remain unable to pass on costs incurred from rising prices of oil and metals."

While demand continues to weaken, stocks of finished goods remained stable for a third month - a balance of 17 per cent said they are "more than adequate".

As a result, many industrialists plan to rein back their output. Over the next three months, 28 per cent expect their output to fall, while 24 per cent expect it to raise it. This negative balance of minus five is the lowest since last December, when it was minus six and marks a steady decline since February when there was a balance of 19 per cent intending to step up their output. Meanwhile, petrol prices have reached a new high, according to the AA Motoring Trust.

It said pump prices for unleaded had soared to a record 86.21p a litre, passing the previous record of 86.05p a litre on April 17 this year.

The average cost of diesel had also reached a new high of 90.34 pence per litre, beating the previous record of 90.17 pence set on April 11.

The trust said that with unleaded petrol costing on average 79.6p a litre in January, individual private motorists were now paying £94.69 per month on car fuel compared to £ 87.43 in January.